WASHINGTON, October 24, 2014 — Pay inequity is a controversial topic. There is a debate about whether it even exists and there are many debates about what makes jobs equal.
Let us define pay inequity as occurring when two people are doing the same or very similar jobs to each other and are paid at different rates.
This author, as a business owner, takes the position that pay inequity does exist. How does it happen?
The employer and the employee both want the best deal when they negotiate pay and benefits. Business owners’ first goal will be to get the best employee for the least pay. This will obviously reduce their costs and increase profits. If a business owner has a vacancy in his firm, he wants to find the best employee for the least amount of pay.
At the same time, candidates for a job vacancy want the most money they can earn. This is in direct conflict with the business owners’ goal of saving costs.
The key difference between employers and potential employees is that the candidates have far less information than business owners and find themselves at a major disadvantage when negotiating pay. For example, how much can the business owner afford to pay? How many candidates are applying for the job and what are their salary requirements? Is the business owner willing to pay a very high salary to attract exceptional candidates?
When entering negotiations, personality will be a significant driver in discussions. A less assertive, a less confident, a less informed or less experienced person will be less willing to state their salary requirement. Those with an opposite personality will be more willing to state their salary requirements directly.
Risk-averse people will take any salary offered. Risk tolerant people will push for a higher salary and stand their ground in negotiations.
It is interesting to observe how the counter-offer dialogue proceeds as well. Risk tolerance will be the defining characteristic for the person considering the job. The more risk tolerant the person is, the more he or she will be willing to continue the negotiations at the risk of losing the offer.
Do men’s and women’s personalities differ significantly enough to explain why there is a pay gap between them? Do people from socio-economically disadvantaged backgrounds has less risk tolerance? There is some evidence in the psychological literature that says this may be true. Women and poorer people may also have less assertiveness and confidence than their male or affluent counterparts, respectively.
Another interesting group that may have little to no ability to successfully negotiate includes those have retired from a career after many years and now seek a new job. For example, if an employee worked for one company for 25 years, how many times did he or she have to negotiate for a new job, even if the employee did negotiate within a firm he or she had been a part of for decades,
This may explain how pay inequities began. But can they be resolved in today’s modern world? In truth, pay inequity may reinforce a person’s feeling of being less worthy than others. As a result, it might be a self-perpetuating cycle.
Pay inequity is in the forefront of modern discussions. It is an open issue that is routinely discussed. Any individuals who feel they are paid inequitably must consider their options and try to learn the art of negotiation through media (new and social), the Internet and other social environments.
One of the best and simplest methods to gain an edge in salary negotiation is information gathering. Learn as much as you can about the job, its environment, pay histories, business profitability, the amount and type of competition for open vacancies, and so forth. The amount of risk you can take is dependent on the availability of other jobs. If you are highly competent and there are other potential opportunities, you should practice taking risk.
The art of negotiation is the ability to persuade in a kind and resilient manner. This takes practice. Do not practice this art with your potential employer. Instead, practice well in advance with anyone who is willing to role play with you, especially someone who is a great negotiator.